There Will Be Conflict

Some of the most interesting stories in a political season like this one come when TV cameras capture a candidate telling one constituency something that another part of the base finds alarming. Corporations like Microsoft face the same challenges in tailoring messages to investors, employees, customers and partners in different settings.

Case in point: Microsoft CEO Steve Ballmer's annual meeting with financial analysts last month. Topic One was, of course, Microsoft's then-fresh bid to take over Yahoo!, a deal that, if it goes through, will probably have limited impact on partners for a few years (see "Time to Gear up for a MicroHoo! Partner Program?"). Ballmer's conversation with analysts touched on a lot more than Yahoo!, though, and there were a few bombshells in the speech for Microsoft partners.

The biggest surprise involved Microsoft ONline, the company's effort to provide managed services to enterprise customers such as Energizer, the battery manufacturer. Las August in this space, I argued that while Microsoft Online is something to watch, Microsoft's customer base of about six installations wasn't yet something to worry about. Things ave changed. In February, Ballmer told analysts, "We now have a pipeline of literally several hundred customers, large customer who are looking to move in this direction with us."

An unrelated Ballmer comment should get enterprise partners' attention: "We have extended our account coverage to reach smaller enterprises with our own direct people." Combine that with several Ballmer mentions of sales force increases in emerging markets and a global enterprise partners has good reason to say, "Hmm."

A broader swath of partners should pay attention to Ballmer's comment about Software as a SErvice (SaaS). It's been clear for a while that SasS will require big changes to partner business models in the next few years. For those partners who think SaaS will only affect those who want to chase the opportunity, consider that Microsoft's CEO acknowledges the possibility that Microsoft may have to sacrifice parts of its own most profitable business lines to sat a the front of the pack. "If somebody is going to cannibalize us, better that it be ourselves," Ballmer said last month., before adding the rosier assessment that "a lot of it, I think, is net new opportunity."

Certainly, Microsoft was also telling the financial community about opportunities that are also good news for parts of the channel: faster-than-the-market growth in servers, the plan to democratize virtualization and Ballmer's contention that the first service pack will help Microsoft turn the corner on Windows Vista deployments in the enterprise.

Nonetheless, the red flags in the speech serve as a reminder that even for the most partner-focused vendor, a huge and diverse channel means inevitable conflict of one kind or another.

What's your take? Let me know at sbekker@rcpmag.com or post a comment at the end of this article.